Bill Ackman steps down from J.C. Penney board

Tiffany Hsu

Boardroom brawling at J.C. Penney Co. has claimed its latest casualty: activist investor Bill Ackman, who stepped down as a director after publicly voicing concerns about the struggling retailer's chief executive and chairman.

The department store chain said Tuesday that Ackman had been replaced on the board by retail veteran Ronald W. Tysoe. Tysoe spent nearly two decades in high-level positions at Federated Department Stores, which has since become Penney competitor Macy's Inc.

Penney, which has seen its stock slump amid several straight quarters of double-digit revenue plunges, also reaffirmed its "overwhelming support" for Chairman Thomas Engibous and Chief Executive Myron Ullman.

The Plano, Texas, retailer's shares fell 49 cents, or 3.7%, to $12.68 Tuesday. The stock has plunged more than 35% this year and has lost more than half its value since late 2010, when Ackman's hedge fund, Pershing Square Capital Management, disclosed its 16.5% stake in the company.

Ackman, whose hedge fund is Penney's largest shareholder, had spent last week agitating for Engibous' removal and Ullman's speedy replacement.

On Tuesday, Ackman said in a statement that his departure from the board "is the most constructive way forward for J.C. Penney and all other parties involved."

The billionaire later declined to say whether he planned to dump his shares in the company.

Penney said it plans to name another director in addition to Tysoe "in the near future."

Liz Dunn, an analyst with Macquarie Capital, wrote in a note to clients that the board shuffle "restores harmony" and enables directors to "re-focus on stabilizing the business."

"The board disagreements and challenges to leadership were a huge distraction that threatened the notion that JCP was confident in its plan and its leadership," she wrote.

"Reading between the lines, the board's strong support for Ullman implicitly suggests to us that JCP is on the road to recovery, which is an encouraging development," Grom wrote in a note.

Without Ackman's influence, Penney may have ended up a radically different company.

Ullman was chief executive of the retailer before Ackman pushed Apple Inc. alum Ron Johnson into the position in 2011. But after a series of missteps, including a shift away from discounted prices and the pursuit of a more upscale identity, Penney returned Johnson's post to Ullman in April.

Last week, Ackman publicly pushed the Penney board to step up its pace in finding a permanent replacement for Ullman, only to face a quick rebuke. In their own statement, Engibous and the board stood behind Ullman and branded Ackman's actions as "disruptive and counterproductive."

On Friday, Ackman called for Engibous to step down. Major investors, reportedly including Penney backer billionaire George Soros, began taking sides.

Reducing the acrimony on the board still leaves the chain with several challenges, such as how to boost its customer base and compete with rivals such as Macy's.

Penney recently had to swat down a report in the New York Post that commercial lender CIT Group Inc. had halted funds to some of its suppliers. The company, which said it "continues to have ample liquidity to manage its business," said CIT "continues to factor and support deliveries" from vendors.

Penney will report its quarterly results next week.

"The outlook remains negative and the long term success of the company's new merchandising and promotion strategies remains uncertain," Standard & Poor's analyst David Kuntz wrote in a note to clients. "The results of the upcoming back to school and holiday season will be important milestones in assessing the effectiveness of these strategies."